Ryall exaggerating health savings, says Labour

Labour is accusing Health Minister Tony Ryall of exaggerating the potential savings from his flagship health reforms by up to $350 million.

Mr Ryall said in October that pooling district health board tasks such as payroll and procurement would release up to $700m over five years for frontline services.

But Labour health spokeswoman Ruth Dyson said papers issued under the Official Information Act showed the savings could be just half that.

She is also questioning why the Treasury did not do its own analysis, relying instead on estimates that consultancy firm LECG made for District Health Boards New Zealand last year.

Mr Ryall rejected the claims, saying the LECG estimates were conservative and the Treasury had sought additional advice from Ernst and Young. "If the Labour party's main gripe is that after nine years in office, we'll only save $350 million instead of $700 million, well, I think New Zealanders will be happy to have that go to frontline services."

LECG estimated the plans were likely to save 5 to 10 per cent of the $1 billion a year DHBs spend on back office services to be pooled. This would be supplemented by a cumulative further $20m a year in additional avoided costs.

The savings would begin from 2012 and reach $180m a year by 2016/17.

Ms Dyson said Mr Ryall's decision to use the upper estimates when announcing the reforms raised serious questions about his claimed savings. "The fact that Treasury documents show they did no analysis of whether the claims of savings were accurate is quite disturbing and questions must be asked about just how accurate the savings figures being bandied about by Tony Ryall are."

Mr Ryall said the papers made clear the estimates were conservative, and the Treasury had reported that overseas experience showed they could be up to 30 per cent.

"They had some caveats around that so they've concluded that we should go to a more conservative figure of up to $700 million."

The Government also expects other savings through the creation of a National Health Board to oversee the $9.7b a year DHBs spend on primary and hospital services.

Mr Ryall said NHB chairman Murray Horn – who led the ministerial review group that recommended the reforms – was being paid $1500 a day plus gst while the board was established.

Mr Horn was working about two days a week on the project, and would move on to a salary at a lower rate once the board was operating.

- © Fairfax NZ News